As we enter 2005, global demographics are shifting at an accelerated pace. This is causing certain national markets to expand while others contract—all while shaping the world economy.

In specific countries, consumer income is increasing resulting in healthier imports. In others, a rising median age is affecting consumer needs, preferences and tastes. If incorporated in your global trade and investment strategy, this information can be extremely valuable.

The First Step

Conduct research to identify the locations of tomorrow’s growing and declining markets. Determine consumer needs and demands, understand how tastes may change, and project future levels of disposable incomes. Sound difficult? Read on.

By studying shifts in world demographics, you can pinpoint where tomorrow’s major populations will live, identify the fastest-growing age groups —an important indicator of tastes and needs—and predict, based on similar demographics elsewhere, demand for your products or services.

Once you have completed your research, the next step is simple. Concentrate on those regions that hold the most marketing promise and put the others on hold. You may want to take the analysis further, by categorizing geographically and demographically where your most serious efforts should be directed.

Locate Tomorrow’s Largest Population Centers Today

According to the U.S. Census Bureau, the world’s total population surpassed 6.4 billion in January 2005. This is anticipated to exceed 7 billion by 2013.

Where will those people live in the first quarter of the twenty-first century? Following long-established geographic and cultural patterns, almost all of the net population growth (the difference between births and deaths) will occur in developing countries located in Africa, Asia and Latin America.

For example, by 2013, China’s population is expected to reach almost 1.4 billion, followed by India’s, projected at 1.2 billion. Indonesia follows at 268 million, Brazil at 201 million, Pakistan at 190 million, and Bangladesh at 169 million. Note: In 2013 the United States is projected to be the third most populous country with 317 million people.

Don’t Just Focus on Average Income

Average per capita income in developing countries is understandably low as compared with developed countries. In 2004, for example, U.S. gross domestic product per capita was approximately $39,000. On the other hand, per capita income in China was about $1,100 and only $530 in India.

Based on these figures, some U.S. exporters may conclude that consumers in China or India can’t afford their products or services. That could prove to be a costly mistake.

In terms of buying power, general per capita income figures can be misleading. For instance, India is estimated to have a middle class of more than 200 million people with the same purchasing power as the U.S. middle class. For just about all exporters and investors, a new and relatively affluent market of 200 million plus consumers is well worth pursuing.

Review Fastest Growing Age Groups

Since the 1970s, the average life span shot up about 11 years. This increased longevity has contributed to global population growth and is leading to a shifting age demographic characterized by higher proportions of the elderly. As a result, over the next two decades the age structure of world population will continue to shift, with older age groups making up an increasingly larger share of the total. In fact, the number of people age 65 and over is estimated to more than double. The greatest relative increase will occur in developing countries, while the largest absolute change will take place in Asia. The bottom line: by 2020, two-thirds of the world’s elderly will live in developing countries.

As this age shift occurs, the elderly population in the United States and the rest of the developed world will increase by more than 50 percent. How will this affect demand for your products or services?

Tailor Your Products or Services To Suit Aging Populations

As the world’s elderly population increases, demand for products and services designed to satisfy its needs also will increase.

For example, Americans over the age of 50 tend to use significantly more pharmaceutical products than any other segment of the population. As the world’s population continues to age in both developed and developing countries, the demand for health-related products, as well as home care, is anticipated to skyrocket. Exporters and investors may wish to consider investigating this market segment in depth.

Follow the Median

As the elderly population grows in numbers, the median age of the world’s people will continue to rise as well. Not to be confused with average age, the median means half of the population will be above and half below the age cited.

In 1998, the median age was 24 in less developed nations, and 37 in more developed countries. However, by 2025, the median ages will rise to 30 and 43, respectively. Keep in mind: these people grew up in an increasingly sophisticated age in terms of technology, communications and consumer products.

Many of these age groups were influenced by United States’ culture; as youngsters they listened to rock ‘n roll, wore blue jeans, and enjoyed American-style burgers and fries. This also is a generation that has become better educated, built an expanding middle class and is enjoying a more affluent lifestyle.

What implications does this have for consumer spending? According to Harry S. Dent, Jr., author of The Roaring 2000s Investor, on average, Americans enter the workforce at age 19, get married at age 25.5 (27 for men and 24 for women), bear their first children two years later, and purchase their first homes at age 33 or 34. They trade up to the largest homes they’ll own by 44, and fully furnish them by age 46.5 or 47.

Interestingly, the average American also reaches peak spending at about 46, the same time the kids leave home. Dent observes that empty-nest couples then spend more on vacation homes, travel and leisure. They also become prospects for investment services and products as they approach retirement age.

Developed Country Spending Patterns Are Similar to Those in U.S.

Spending patterns in other developed nations are similar to those in the United States. As a result, it’s reasonable to assume that as the median age rises in those countries, consumer spending also will rise. Depending on your products or services, closely targeting these consumers may be a sound strategic decision.

This article appeared in Impact Analysis, January-February 2005
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John Manzella
About The Author John Manzella [Full Bio]
John Manzella is a world-recognized author and speaker on global business, emerging risks, and the latest economic trends. He's also founder of both the ManzellaReport.com and Manzella Trade Communications, Inc. His latest book is Global America: Understanding Global and Economic Trends and How To Ensure Competitiveness.




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